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5 Stocks Growing Their Dividends by 20% Per Year

If you’d like to boost your dividend income, take a look at these stocks.

Dividend investors would be wise to focus not just on a stock's current yield, but also on the long-term growth potential of its dividends. That's because strong businesses that consistently raise their dividend payouts reward shareholders with a steadily rising income stream that essentially equates to a raise every year. And, well, who doesn't like a raise?

But there are other reasons to value dividend growth so highly, and they're well supported by research. For instance, a study by C. Thomas Howard published in Advisor Perspectives found that for every percentage point a stock's yield rises, its annual return increases by 0.22 percentage points if it's a large cap, 0.25 if it's a mid cap, and 0.46 if it's a small cap. Even better, Howard found that dividend-growing stocks outperformed dividend cutters by 10 percentage points per year from 1973 to 2010 and beat both flat- and no-dividend stocks. And the icing on the cake is that Howard showed that this outperformance came with a third less volatility. Higher returns, less volatility-induced stress, and a steadily growing income stream -- what's not to love?

With that in mind, here are five stocks that have grown their dividends by more than 20% over the last year:

CME Group operates the leading global exchange and clearinghouse for futures contracts that financial institutions, corporations, governments, and traders use to manage risk. CME Group currently has a four-star ranking on CAPS and offers investors a 2.5% yield.

Mattel is the worldwide leader in the design, manufacture, and marketing of toys and family products, with a global distribution network that spans across more than 150 nations. Mattel's best-selling brands include Barbie, Hot Wheels, Monster High, American Girl, Thomas & Friends, and Fisher-Price. Fools have given the toymaker a four-star rating in CAPS, and its stock is yielding 3.5%.

Texas Roadhouse is a full-service, casual-dining restaurant chain that offers an assortment of specially seasoned steaks hand-cut daily on the premises and cooked to order over open gas-fired grills. With about 400 steakhouses in the U.S. and internationally and plans to eventually reach 800 locations, Texas Roadhouse has a long runway for growth ahead. CAPS participants no doubt appreciate this as well as Texas Roadhouse's growing 1.9% dividend and have awarded the company a four-star rating.

WellPoint is one of the nation's largest health benefits companies, offering network-based managed-care plans to the large and small employer, individual, Medicaid, and senior markets in the United States. WellPoint's scale is impressive; approximately one in nine Americans receives coverage for medical care through WellPoint's affiliated plans. WellPoint has a four-star rating in CAPS and is yielding 1.7%.

Harris is an international communications and information technology company serving government and commercial markets in more than 125 countries. The company's 6,000 engineers and scientists develop communications products, systems, and services used by organizations such as the National Security Agency and the U.S. military. This Fool favorite has a top five-star CAPS rating, and offers investors a growing 2.9% dividend.

The Foolish bottom lineHad you invested in these companies a year ago, you would have enjoyed total dividend increases ranging from 21% to 24%. That level of growth would provide a substantial boost to just about any investor's dividend income. But more important to investors today is to identify the companies that will grow their dividends substantially in the years ahead. If you're interested in hearing about some excellent companies that are likely to boost their dividends from this point forward, I'd like to offer you a brand-new free report from The Motley Fool's expert analysts called "Secure Your Future With 9 Rock-Solid Dividend Stocks." Today I invite you to download it at no cost to you. To discover the identities of these companies before the rest of the market catches on, you can access this valuable free report by simply clicking here now.

Joe Tenebrusomanages a Real-Money Portfoliofor The Motley Fool and is an analyst on the Fool's Stock Advisor andSupernovapremium service teams. You can connect with him on Twitter: @Tier1Investor. Joe has no position in any stocks mentioned.

Author

Joe honed his investing skills as an analyst for Stock Advisor, Fool One, Supernova, Million Dollar Portfolio, and Income Investor. He battle-tested his investment philosophy and strategies as portfolio manager of Tier 1, a market-crushing Motley Fool real-money portfolio that delivered 24.58% annualized returns during its existence. Now, Joe’s mission is to pass on what he’s learned -- and what he continues to learn -- as a contributing writer to Fool.com.
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